American Home Shield 2015 Annual Report Download - page 88

Table of Contents
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The table below summarizes the other intangible asset balances for continuing operations:
As of December 31, 2015 As of December 31, 2014
Accumulated Accumulated
(In millions) Gross Amortization Net Gross Amortization Net
Trade names(1) $ 1,608 — 1,608 $ 1,608 $ — $ 1,608
Customer relationships 571 (517) 53 533 (489) 44
Franchise agreements 88 (63) 25 88 (59) 29
Other 53 (36) 18 47 (32) 15
Total $ 2,320 $ (616) $ 1,704 $ 2,277 $ (581) $1,696
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(1) Not subject to amortization.
Amortization expense of $38 million, $52 million and $51 million was recorded in the years ended December 31, 2015, 2014
and 2013, respectively. For the existing intangible assets, the Company anticipates amortization expense of $30 million, $19 million,
$13 million, $8 million and $6 million in 2016, 2017, 2018, 2019 and 2020, respectively.
During the years ended December 31, 2014 and 2013, the Company recorded pre-tax non-cash impairment charges of $139
million ($84 million, net of tax) and $673 million ($521 million, net of tax), respectively, associated with the goodwill and trade name
at its former TruGreen business, which is reported in Loss from discontinued operations, net of income taxes in the consolidated
statements of operations and comprehensive income (loss).
Note 5. Income Taxes
As of December 31, 2015, 2014 and 2013, the Company has $16 million, $13 million and $8 million, respectively, of tax
benefits primarily reflected in state tax returns that have not been recognized for financial reporting purposes (“unrecognized tax
benefits”). At December 31, 2015 and 2014, $12 million and $11 million, respectively, of unrecognized tax benefits would impact the
effective tax rate if recognized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
Year Ended December 31,
(In millions) 2015 2014 2013
Gross unrecognized tax benefits at beginning of period $ 13 $ 8 $ 8
Increases in tax positions for prior years — 1 1
Increases in tax positions for current year 3 7 1
Lapse in statute of limitations (1) (1) (2)
Gross unrecognized tax benefits at end of period $ 16 $ 13 $ 8
Based on information currently available, it is reasonably possible that over the next 12 month period unrecognized tax
benefits may decrease by $7 million as the result of settlements of ongoing audits, statute of limitation expirations or final settlements
of uncertain tax positions in multiple jurisdictions. As of December 31, 2014, the Company believed that it was reasonably possible
that a decrease of up to $1 million in unrecognized tax benefits would have occurred during the year ended December 31, 2015.
During the year ended December 31, 2015, unrecognized tax benefits actually decreased by $1 million as a result of the closing of
certain state audits and the expiration of statutes of limitation.
The Company files consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and foreign
jurisdictions. The Company has been audited by the IRS through its year ended December 31, 2013, and is no longer subject to state
and local or foreign income tax examinations by tax authorities for years before 2008.
In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities. For U.S.
federal income tax purposes, the Company participates in the IRS’s Compliance Assurance Process whereby its U.S. federal income
tax returns are reviewed by the IRS both prior to and after their filing. The U.S. federal income tax returns filed by the Company
through the year ended December 31, 2013 have been audited by the IRS. In the second quarter of 2015, the IRS completed the audits
of the Company’s tax returns for the year ended December 31, 2013 with no adjustments or additional payments. The Company’s tax
returns for the year ended December 31, 2014 are under audit, which is expected to be completed by the second quarter of 2016. The
IRS commenced examinations of the Company’s U.S. federal income tax returns for 2015 in the first quarter of 2015. The
examination is anticipated to be completed by the second quarter of 2017. Five state tax authorities are in the process of auditing state
income tax returns of various subsidiaries.
The Company’s policy is to recognize potential interest and penalties related to its tax positions within the tax provision.
Total interest and penalties included in the consolidated statements of income are immaterial. As of December 31, 2015 and 2014, the
Company had accrued for the payment of interest and penalties of less than $1 million.
86 2015 Annual Report